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G v P

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
JurisdictionHong Kong
Judgment Date23 August 2023
Neutral Citation[2023] HKCFI 2173
Subject MatterConstruction and Arbitration Proceedings
Judgement NumberHCCT110/2022
Year2023
HCCT110/2022 G v. P

HCCT 110/2022

[2023] HKCFI 2173

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 110 OF 2022

____________________

IN THE MATTER of a Final Award dated 28th November 2022 made by the Hong Kong Arbitration Society
and
IN THE MATTER of Section 84 of the Arbitration Ordinance (Cap 609)
and
IN THE MATTER of Order 73 Rule 10 of the Rules of the High Court (Cap 4A)

____________________

BETWEEN
G Applicant
and
P Respondent

____________________

Before: Hon Mimmie Chan J in Chambers
Date of Hearing: 7 August 2023
Date of Decision: 23 August 2023

_____________

D E C I S I O N

_____________

1. This is the application made by the Respondent to set aside the order made by this Court on 2 December 2022 (“Enforcement Order”), granting leave to the Applicant to enforce an arbitral award made on 28 November 2022 in Case No HOA-2188/2022 (“Arbitration”) of the Hong Kong Arbitration Society (“Award”). The grounds for setting aside were not specified in the Respondent’s Summons, but the grounds stated in the Respondent’s affirmation filed on the same day of the Summons are that: there was no valid arbitration agreement between the Applicant and the Respondent; and the Respondent was not given the reasonable opportunity to present arguments in the Arbitration.

2. As this Court held in KB v S HCCT 13/2015, 15 September 2015, it is an abuse of process to issue a summons to set aside an order granting leave to enforce an arbitral award if the grounds for setting aside are not properly set out and disclosed in the summons. The Arbitration Ordinance (“Ordinance”) clearly sets out as its object and underlying principles the facilitation of the fair and speedy resolution of disputes by arbitration without unnecessary expense, and provides that the Court should interfere in the arbitration of the dispute only as expressly provided for in the Ordinance. The Court has emphasized that it is not conducive to such objectives and the pro-arbitration policy to require parties and the Court to waste time and costs in speculating on the precise grounds which are relied upon by an applicant to set aside either an arbitral award, or an order granted by the Court to enforce the award as a judgment of the Court. Parties should not expect the Court to be indulgent towards applicants who fail to clearly state in the summons the precise grounds of the Ordinance which are relied upon. It is not for a party to raise grounds only at the hearing.

3. In the Submissions filed for the hearing of the setting aside application, the Respondent’s Counsel stated that the application is for setting aside both the Award and the Enforcement Order, on the grounds set out in the Respondent’s affirmation. However, since more than 3 months have elapsed from the date of receipt of the Award, the application is clearly out of time and is impermissible (Article 34(3) of the Model Law, given effect by section 81 of the Ordinance). The purported application to set aside the Award will not be considered in this Decision.

4. Having heard the parties’ submissions, the application to set aside the Enforcement Order is allowed, for the reasons set out below.

Factual background

5. The Applicant is a licensed moneylender in Hong Kong. On 8 September 2022, the Applicant as lender and the Respondent as borrower entered into two agreements, a Loan Agreement and a Supplemental Loan Agreement (“Supplemental Agreement”), on essentially the same terms so far as the loan advanced and the repayment terms are concerned. I have not been drawn to any differences in these respects. The only revision set out in the Supplemental Agreement relates to the manner of resolution of disputes arising out of or in connection with the loan. Clause 1 of the Supplemental Agreement states:

“Any dispute or difference arising out of or in connection with the Loan Agreement and this Supplemental Loan Agreement shall, at the option of the Claimant (or the Plaintiff, as may be applicable), be referred to and finally resolved by arbitration administrated by the Hong Kong Arbitration Society and in accordance with the HKAS Online Arbitration Rules for the time being in force or by court proceedings in Hong Kong courts.

凡因借款合約及本補充貸款合約所引起的或與之相關的任何爭議或意見分歧，均應由申請人(或原告人，視何者適用而定)選擇提交香港仲裁公會按其現行有效的香港仲裁公會網上仲裁規則進行仲裁，或提交香港法庭進行法院程序，最終解決。”

6. The terms and conditions of the Loan Agreement state Hong Kong law to be the governing law and that the parties “irrevocably submit to the non-exclusive jurisdiction of the courts of Hong Kong”.

7. Clause 3 of the Supplemental Agreement provides as follows:

“In the event of any discrepancy or inconsistency between the terms of Loan Agreement and this Supplemental Loan Agreement, the terms of this Supplemental Loan Agreement shall prevail.

借款合約的條款與本補充貸款合約不符或不一致的，以本補充貸款合約的條款為准。”

8. Apart from dispute resolution, the Supplemental Agreement also states, for the Respondent as borrower, his residential address as well as an email address of xyz@china.hk. The Loan Agreement only stated the Respondent’s residential address.

Absence of valid arbitration agreement ground

9. The Respondent argued that the dispute resolution clause contained in the Supplemental Agreement is not an arbitration agreement, as there is no element of compulsion of the parties to arbitrate, and that without compulsion, there is no valid arbitration agreement. The Respondent relies on the observation made by Ma J (as His Lordship then was) in Tommy CP Sze & Co v Li & Fung (Trading) Ltd [2003] 1 HKC 418. Tommy CP Sze’s case dealt with an application for stay of proceedings under the repealed Arbitration Ordinance Cap 341, and His Lordship stated at paragraph 18 of the judgment:

“It is of course crucial in any application for a stay (whether under s 6 of the Ordinance or art 8 of the Model Law) that there exists an arbitration agreement. By this is meant an agreement between the parties by which present or future disputes or differences between them are required to be resolved by the arbitral process. … An agreement which does not compel parties to have disputes or differences resolved by agreement is not an arbitration agreement for present purposes. Where, for example, an option is given to the parties to go to arbitration if they so choose but with litigation in the courts being an available option as well, this is not truly an arbitration agreement. There must be its element of compulsion in the agreement between the parties that any disputes or differences must be arbitration.”

10. The courts have interpreted an optional arbitration agreement differently in cases such as China State Construction Engineering Corporation Guangdong Branch v Madiford Limited HCA 6563/1991, 2 March 1992, William Company v Chu Kong Agency Co Ltd [1995] 2 HKLRD 139, Hermes One Ltd v Everbread Holdings Ltd [2016] 1 WLR 4098, Polytek Overseas Ltd v Grand Dragon International Holdings Co Ltd [2017] 3 HKLRD 258, Z v Y [2018] HKCFI 2342, and Kinli Civil Engineering Ltd v Geotech Engineering Ltd [2021] 6 HKC 524. In Kinli, I set out various authorities considered and argued on clauses which give an option or a choice to the parties between arbitration and litigation. I am not persuaded that the reasoning and analysis of the cases referred to in Kinli, and in particular the finding of the existence of an arbitration agreement even when the clause adopts language such as “may” or “can” (as held in China State, Hermes One and Guangdong Agriculture Co Ltd v Conagra International (Far East) Ltd [1993] 1 HKLR 113), do not apply by virtue only of the observation made in Tommy CP Sze as to clauses which do not provide for an element of compulsion. Cases may turn on the different terminology used in the contract, and the contract construed as a whole. At the end of the day, the ultimate question is one of construction of the clause in question, to ascertain the objective intention of the parties at the time of entering into the...

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